Security and validation requirements for setting up new companies are being tightened amid concern about shell companies being formed with links to Chinese entities.The new security features are set to facilitate tech-enabled real-time oversight of company incorporation and statutory filings, so that government officials will be able to detect entities that match risk parameters.Several companies with links to Chinese organizations were unearthed recently when the Serious Fraud Investigation Office launched a probe into 33 entities as part of a crackdown on shell companies.The new system that is being rolled out leverages a two-factor authentication involving directors of companies and professionals like chartered accountants and company secretaries who actually submit the statutory documents.The new system is part of the ‘company module’ of the revamped MCA21 portal of the ministry of corporate affairs. It links the emails, user IDs and digital signatures of the person filing a company document and also requires the Permanent Account Number (PAN) issued by the Income Tax department, said a person familiar with the development.The ministry has made a beginning already and will scale it up once the peak of corporate annual returns filing is over in October so that there is no disruption in the filings, said the person on the condition of anonymity.The idea is to have real-time validation of the identities of those using the services of the ministry of corporate affairs for various requirements under the Companies Act. This will allow authorities to keep a watch on the filings through IT systems and ensure that only authorized people whose identity is verified are able to file documents for opening a business.“While the government has been easing the compliance requirement in many areas in the spirit of ease of doing business, we expect the rate of compliance to also go up. The new ‘company module’ leverages technology to make statutory filings more secure,” said the person cited above.According to Vikash Thakur, associate director, entity setup and management at Nexdigm, a professional services group, the ministry has introduced several authentication layers to link the director’s email ID, mobile number, and user ID at the time of account creation. The account holder will get a one- time password verification code at each time of login. Any subsequent account creation will have to be validated by the director using the OTP system.“Linking email ID with only one user ID will add administrative efficiency to ministry of corporate affairs (MCA) as well as to the user. So, this move is beneficial for the authority from the regulatory perspective. This will strengthen the database, clean-up multiple email IDs tagged to a given corporate house and bring out effective communication between the authority and the particular entity,” said Thakur.Sandeep Sehgal, partner-tax at AKM Global, a tax and consulting firm, said the new version of MCA 21 is focused on enhancing the security of a company’s data available on the MCA portal that contains the financials, forms and returns, etc. filed by the company.“The present system is built upon one-factor authentication and it is relatively easy to access the information. The new system will make it more secure as only authorized users would be able to access and use it,” said Sehgal. In the new system, it would be easy to fix the accountability of the professionals and the personnel involved in incorporation and filing of any form.The ministry will also deploy chatbots on its portal to help users. An email seeking comments for the story sent to the spokesperson for the ministry on Monday remained unanswered at the time of publishing.